 Zero Accounting Software 2023 Budgeting Overview. Get ready to become an Accounting Hero with Zero 2023. First, a word from our sponsor. Well, actually, these are just items that we picked from the YouTube Shopping Affiliate Program, but that's actually good for you, because these aren't things that we're just given to us from some large corporation which we don't even use in exchange for us selling them to you. These are things that we actually researched, purchased, and used ourselves. Bayer Dynamic? Not sure if I said that right, but this is the DT770 Pro 250 OHM Studio Reference Closed Back Headphones. I wear headphones basically every day for a large part of the day. They are important to me. Therefore, I've gone through many different kinds of headphones. I've had these for some time, and they've worked quite well. They fit over my ears, but I'm still able to put my glasses on under the headphones. 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You can purchase one at a time, or have a subscription model, giving you access to all the courses, courses which are well-organized, have other resources like Excel files and PDF files to download, and no commercials. Here we are in our custom Zero Home page, opening the company file. We set up in a prior presentation, get great guitars. We will duplicate some tabs to put the major financial statement reports in, that being the balance sheet and the income statement. Right-click in the tab up top so we can duplicate it. Right-click in the tab up top again so we can duplicate it again. Back to the tab, to the middle, Accounting drop-down, opening up a balance sheet. This being a comparative one, but if you don't have it, you can open the normal balance sheet. Tab into the right, Accounting drop-down, and Income statement. This being a comparative one, but if you don't have it, you can open the standard income statement. We currently have two months of data input in the system and are now thinking about the budgeting process. First, focus in on the differences between the budgeting process and the day-to-day data input that we put into the accounting system during the normal accounting cycle. First thing we want to point out is that if you are working in the accounting department or as a bookkeeper, you will generally be involved in the data input process, recording financial statement transactions to help to generate the reports, balance sheet, and income statement and can't really be expected to create the budgets in and of yourselves, although you could be involved in the generation of the budget, because when you're thinking about the budgeting process, you usually need more information so that you can make projections out into the future. Now, if you have your own bookkeeping system, then obviously if you're a sole proprietor or something, you're wearing multiple hats, you've got to play multiple positions here, you're going to be doing the accounting, and you're going to be doing the budgeting process. The fundamental difference between the budgeting process and the accounting process is with the accounting process, our goal is to take past data. We're supposed to be taking the data as it happens, populate that into the accounting system, properly recording it in accordance to the generally accepted accounting principles or some kind of accounting standard cash accrual system using a double-entry accounting system in order to create financial statement reports, balance sheet income statement, and related reports so that we can comply with anything we need to comply to, taxes, external reporting needs, and have reports that we can use for internal reporting needs. We also need to be able to interact as we go with the accounting process with the people we do business with, including our vendors and our customers and our employees. So that's kind of the goal of the normal accounting cycle. We're taking past data and we're putting it in the system, trying to do it in as efficient way as possible and keeping all the people that we work with as content as possible so that the business itself can focus less on the accounting and more on what they do. In our case, in this company, we sell guitars and we do guitar lessons. That's what the focus should be on to help to generate the revenue. So that's kind of our goal or what we do as a bookkeeper or accounting department. When we look at the budgeting system, you're often going to be involved in the budgeting system as a bookkeeper or in the accounting department because the structure of a budget looks pretty much the same as the structure of the financial statements. You're going to have a budgeted balance sheet and a budgeted income statement. So you as the accountant may have a better grasp, most likely will have a better grasp of how to create a balance sheet and an income statement. And those are going to be very important skills if you're trying to project something that happens out into the future. But the difference is, of course, that now we're taking future unknown data and we're trying to construct a projected balance sheet and income statement out into the future. And primarily, we're thinking about like the income statement performance that happens out into the future. Now, we can't just do that based on past data. So if you work in the accounting department, then you might not have all the information necessary to make accurate projections into the future because management might be doing other things like changing their advertising strategy or increasing the price of products or that kind of stuff. Or if you work as a bookkeeper, same thing, your client is going to be needing to tell you things if they want you to have an accurate budget. You would have to work with management on the sales side and the decision-making side outside of just past data in order to make accurate projections out into the future. So that's why if you work in the accounting department or as a bookkeeper, you could, if they give you nothing else, we could take the past data and say, well, based on past data alone, I could make projections out into the future. I can extrapolate that out into the future in some way, shape, or form and we have at least some summary budget. That's often the starting line of the budget. But then you would need to add on top of that what you think is going to change in the future years. And those things that are going to change possibly could be what's the economy look like in the future. Are we going into recession? Do we have a crazy person running the country or something like that? Is that going to impact? Is it going to impact our business or anything? And we also could have inflation. Is inflation going wild going to impact us or anything like that? And then we could make strategic changes, of course, in the business. Should we focus more on advertising? Should we buy more equipment? Should we buy or hire more employees or lay off employees or sell equipment? All those changes, of course, are designed to have an impact on the performance of the financial statements. That's why they're being done and they're going to take the past data, we'll think about those changes that we think hopefully can improve and make projections based on all these different factors out into the future. Now, when we think about that from an accounting standpoint, then it's like, well, how do I construct the budget? How am I going to do that? Well, note from just the simplest way to start with the budget is to usually think about the income statement. We have two reports. We've got the balance sheet. We've got the income statement. Remember that the balance sheet represents where we stand as of a point in time. So this is where we are as of now. The income statement represents the performance, how well we did over a time frame. So when we think about income accounts, we're talking about revenue. How much revenue did we get over a month or over a year? How much expenses did we have to incur in order to match up and generate that revenue over a month or over a year? So we have timing involved. When we're projecting out into the future, that's basically the form that first comes to mind. Because it would be kind of like if you're trying to see how many miles you can run or how many miles your car can go in a day. What you're going to do is you're going to drive the car for the day and then see how many miles it went and restart the odometer and then do it the next day and see if you can make changes to improve your record or something like that. That's basically what the income statement is doing. This is what we did last year. Let's see if we can reset the odometer, make projections, try to set a target goal and then see how far we can go in the next year on the income statement. Now if we got more complex with that, we would also then go back to the balance sheet and say, well, if I did that, where would I stand at the end of that? We can think, okay, if my income statement performed the way I should, we can then say where would the balance sheet be after that point in time? A year later, where would we stand as of a point in time a year after this or month by month after this? Zero has a little less capacity to do the budgeting for the balance sheet. So we're going to focus mainly on the performance statement, the income statement, which is really the primary statement that you would want on the software because generally you're not really going to be making the projections in the zero software. What you want the zero software to do is to be able to run reports, being able to compare the actual versus the budget, for example, within the zero system. So the zero system for an accounting software, on the accounting side, when you're making the balance sheet and income statement, it's building the reports as you do the data input. For the budgeting side of things, you're just going to enter the budget, right? That's all you're just going to data input the budget. You're not going to create the budget oftentimes in zero. You're going to create it somewhere else, and I would suggest doing it in Excel. So this is what we will do with our practice problem. We will export our two months of data that we have thus far, and then we'll take that data and make projections based on our past performance, taking into consideration future components as well, come up with an income statement in Excel by month, for example, and then we'll take that income statement from Excel and put it back into zero. And why would we do that when we already have it in Excel? Because zero can then do what it does well, which is make comparative reports where we can compare current performance to the budget as time passes. And then we can use those reports to run comparisons. So that's the primary strategy we will have if I go to the first tab over here and we go to the accounting dropdown and we look at the reports. Then the budgeting information is down here and the budget manager. So if we go into the budget manager, you can see basically it's just a data input to enter the budget. And once we have the budget entered into the system, then we can use that to run reports. So again, the strategy is not to make the budget generally in zero. The strategy is to use zero's past data exported to Excel generally and then using Excel so that you can have a lot of flexibility to make projections out into the future, make your projections, then put the budget back into zero so that we can run reports and see, for example, what actually happens as time passes compared to what we budgeted to happen. And that's how we can kind of benchmark ourselves and hopefully improve our performance in the future. So that's what we'll start doing next time.